How the EU Lost to Russia in Negotiations Over Ukraine Trade Deal

Putin's GambitHow the EU Lost Ukraine

The inability of European bureaucrats to keep up with the Kremlin's manipulations -- or Kiev's political calculations -- has cost the EU a trade deal with Ukraine, and severely damaged its foreign policy.

Russian President Vladimir Putin's decisive move came on Nov. 9. That day, after years of courtship, and several months of promises and threats, he met with Ukrainian President Viktor Yanukovych at a military airport near Moscow. The meeting was so clandestine the Russians initially denied that it had taken place at all.

Before that point, the plan had been for Yanukovych to sign a 900-page association agreement, a sort of engagement contract, with the European Union in the Lithuanian capital of Vilnius on Nov. 29. But in early November near Moscow, Putin seems to have sealed an alliance with Ukraine, preempting his rivals in Brussels. And last Thursday Yanukovych postponed the signing of the EU agreement indefinitely.

After giving temporary asylum to whistleblower Edward Snowden and brokering a deal to have Syria give up its chemical weapons, it was Putin's third recent victory over the West, albeit probably not a permanent one. After all, Yanukovych's agreement with Putin is a marriage of convenience, not a marriage of love.

Europe's 'Eastern Partnership' Dream

This tug-of-war began four years ago, when the EU proposed an "eastern partnership" with Ukraine as well as Armenia, Azerbaijan, Georgia, Moldova and Belarus. The EU offered cooperation, free trade and financial contributions in exchange for democratic reforms. Officials in Brussels spoke enthusiastically about the emergence of an historic Eastern European policy not unlike former German Chancellor Willy Brandt's rapprochement with the Warsaw Pact countries in the 1970s. The planned partnership agreements were intended to facilitate visa-free travel, reduce tariffs and introduce European norms. The only thing that was not offered was EU membership.

The EU's other goal, even though it was not as openly expressed, was to limit Russia's influence and define how far Europe extends into the east. For Russia, the struggle to win over Ukraine is not only about maintaining its geopolitical influence, but about having control over a region that was the nucleus of the Russian empire a millennium ago. The word Ukraine translates as "border country," and many feel the capital Kiev is the mother of all Russian cities.

This helped create Cold War-style grappling between Moscow and Brussels. The Russian president, hardened by his fights in the Kremlin, is more adept than EU bureaucrats at manipulating people with venality and affections. None of the top European politicians made a serious effort to win over Ukraine, with neither German Chancellor Angela Merkel nor European Commission President José Manuel Barroso flying to Kiev to convince its wavering president.

'Unprecendented Pressure' from Russia

"I believe the unprecedented pressure from the Russians was the decisive factor," says former Polish Prime Minister and intermediary Aleksander Kwasniewski. "The Russians used everything in their arsenal." Elmar Brok, chairman of the foreign affairs committee in the European Parliament, says: "Yanukovych kept all options open until the end, so as to get the best possible deal."

The official reason for the agreement's failure is Yulia Tymoshenko, the opposition politician who has been in prison for the last two years. The EU had made her release a condition of the agreement. Yanukovych was unwilling to release his former rival, and last week the parliament in Kiev failed to approve a bill that would have secured her release.

But then there are the financial incentives. In the end, the Russian president seems to have promised his Ukrainian counterpart several billion euros in the form of subsidies, debt forgiveness and duty-free imports. The EU, for its part, had offered Ukraine loans worth 610 million ($827 million), which it had increased at the last moment, along with the vague prospect of a 1 billion loan from the International Monetary Fund (IMF). Yanukovych chose Putin's billions instead.

The EU had been banking on its radiant appeal, and on its great promise of prosperity, freedom and democracy, but now Brussels must confront the fact that, for the first time, an attempt at rapprochement was rebuffed because the price was wrong. "If Yanukovych doesn't want to make a deal, then he simply doesn't want to," says Brok.

Battle of the Unions

The EU's eastern partnership had gotten off to a rocky start even before the Ukrainian incident. Belarus dashed the EU's hopes it would join when protesters were violently suppressed after the reelection of President Alexander Lukashenko in 2010. Armenia called off an association agreement with the EU this September.

In the case of Ukraine, it initially seemed as if the Europeans' rational arguments would prevail over Russia's threatening gestures. According to an internal EU analysis, joining the "Eurasian Union" -- a Russia-backed proposed political and economic union including Russia, Tajikistan, Kazahkstan, Belarus and others -- would severely limit Ukraine's sovereignty. Once such a union had been formed, Kiev would no longer be able to enter into any other free trade agreements without Moscow's approval. An alliance with Moscow would thus have the exclusive nature of a marriage. The EU's eastern partnership, in contrast, would still allow Ukraine to enter into other alliances.

And Yanukovych, who has been considered a puppet of the Kremlin, even implemented many of the reforms demanded by the EU. The legal system and criminal law were modernized, trade restrictions were reduced and a few political prisoners were released. "He implemented more reforms than the pro-Western predecessor regime under Tymoshenko," says an EU negotiator.

EU Hopes Dashed

But it turns out those reforms didn't go as the EU hoped. According to the Freedom House organization, democratic basic rights in these eastern partnership candidate nations have not been strengthened in the wake of EU reform demands. Instead, they claim, many of the reforms were implemented half-heartedly and governments only consolidated their power.

The Europeans had mistakenly believed Kiev would automatically turn to the West. After all, isn't half of the population in favor of closer ties with the EU? And aren't there more Ukrainian immigrant workers living in the West than in Russia? They based their argument on economic sustainability, believing they could convince Yanukovych with the prospect of long-term growth rates of at least 6 percent. By contrast, a customs union with Russia would reduce Ukraine's economic growth in the long term.

But in truth, the most important goal for Yanukovych -- who may come across as unsophisticated, but is in fact a shrewd poker player -- is to hold onto power. In order to be reelected in 2015, he needs rapid economic improvement. Ukraine has slid into recession and could even be insolvent soon. The rating agencies have repeatedly downgraded the country's credit rating. Besides, Ukraine is dependent on Russian natural gas, and Moscow has already flexed its muscles by turning off supplies in the winter on three occasions.

The article is shortsighted in the extreme. It is the opinion of some expert economists that Ukraine having to bring its heavy industries up to EU standards would cause large losses in the Ukrainian economy, also ignored is 1/2 of [...]

The article is shortsighted in the extreme. It is the opinion of some expert economists that Ukraine having to bring its heavy industries up to EU standards would cause large losses in the Ukrainian economy, also ignored is 1/2 of Ukraine is ethnically Russian and meddling here on Russia's doorstep is dangerous to Ukraine's social stability .. and insofar as quoting 'Freedom House' .. why doesn't the author just come out and say 'CIA' since rogue agent Phillip Agee fingered this front organization, among others. In fact Agee's article on 'color revolutions' (use google search) is directly relevant to Ukraine and the geo-political manipulations this article glosses over entirely.

golestan 11/25/2013

2. The EU has already huge beneficial impact...

...well beyond its borders, in terms of human rights and protection of minorities. But in order to become a truly positive force on this planet, its members must coordinate their financial systems, abandon some of their jealously [...]

...well beyond its borders, in terms of human rights and protection of minorities. But in order to become a truly positive force on this planet, its members must coordinate their financial systems, abandon some of their jealously regarded sovereignty, and transfer more executive powers to Brussels. That is essential to present a counter-weight to the still very undemocratic China and to replace the long decaying morality of the US.

alanr 11/25/2013

3. To think the Russians will let Ukraine go is naive

Ukraine is the cradle of the Russian civilization; Kievan Rus was the first Russian polity; Ukraine's land is soaked in Russian blood, spilled over hundreds of years of wars. To these enormously important cultural/historic [...]

Ukraine is the cradle of the Russian civilization; Kievan Rus was the first Russian polity; Ukraine's land is soaked in Russian blood, spilled over hundreds of years of wars. To these enormously important cultural/historic issues, add the huge strategic importance of the Ukraine to Russia, unparalleled by any other country. Then there's of course the Crimea, which used to be Russian up until very recently (in historical time).
To think the Russians would just walk away from Ukraine and let it slip out of their control is beyond naive. Trying to wrestle it away from Russia was a fool's errand to begin with.

spon-facebook-10000061525 11/26/2013

4. optional

Actually the soviets turned Ukraine into a russian colony, and managed to do this with a few more countries as well. With others, they've failed. Let me put it this way, if Ukraine joins the EU, then Russia is likely to join too. [...]

Actually the soviets turned Ukraine into a russian colony, and managed to do this with a few more countries as well. With others, they've failed. Let me put it this way, if Ukraine joins the EU, then Russia is likely to join too. Or EU will join Russia. A bigger picture should be seen here, maybe the EU and the EAEC could merge too. Unlikely

spon-facebook-10000630384 11/28/2013

5. optional

What future do you people see with Russia?A country where people die of agony,poverty,whereas the Prime Minister gets treatment for looking younger.I can predict the future if Ukraine signs this deal with Russia,and what do i [...]

What future do you people see with Russia?A country where people die of agony,poverty,whereas the Prime Minister gets treatment for looking younger.I can predict the future if Ukraine signs this deal with Russia,and what do i see?Darkness.Students are taught from early childhood that they should love their country,some of them are showing that love by raising their voices for the well-being of our country. Yanokovych shouldn't be the only one to decide.This ,this is "OUR LAND".